Foreign Relations of the United States, 1949, The Far East: China, Volume VIII

102.22/8–1949: Telegram

The Consul at Shanghai (McConaughy) to the Secretary of State

Shanghai, August 19, 1949—6 p. m.
[Received August 21—12:56 a. m.]

3344. ReConGentel 2990, August 2. Unfortunate that absence mail service prevents submisison comprehensive report occupation ConGen by ex-Navy employees. In order place affair in some perspective and pull together loose ends, following concluding observations submitted:

1. Undoubtedly authorities acting through semi-official agency General Labor Union did order demonstrators from building on August 2. Convincing evidence at hand that SMCC through Aliens Affairs Bureau followed affair closely from considerable distance and Was increasingly perturbed by mounting proportions which incident assumed when nothing vital was at stake from Communist viewpoint.

2. Although authorities did finally intervene behind scenes, their extreme reluctance take any public action which might be construed as directed against proletariat is significant indication of lengths to which they will go even in face damaging criticism abroad to maintain appearance solidarity regime with workers.

3. ConGen successfully maintained its stand on basic issue that it would not bow to intimidation by agreeing to any settlement while workers were in unlawful occupation building. Workers evacuated August 2 and settlement offer transmitted to GLU 3 p. m., August 3. ConGen was under no commitment to agree to any settlement before that time.

4. Final settlement was in effect compromise between original Navy offer of 2 weeks’ to 1 month’s pay and workers demands of 6 months’ pay. It is undeniable settlement finally reached, while better than we had any right expect during darkest hours siege, did cost Navy slightly more than 3 times amount originally estimated and violent conduct of workers did indirectly serve increase amount which they received. This is true notwithstanding fact we steadfastly refused yield to pressure tactics while they were actually being applied. From financial and prestige standpoints I am dissatisfied with outcome affair. It is part of price we have to pay for living with regime which, partly perhaps through confused ignorance and unpreparedness re foreign affairs but at least to larger extent by deliberate intent, has thus far grossly violated rights of foreign governments and nationals and which has universally supported exorbitant severance pay demands of increasing hordes dismissed employees in contracting economy. Settlement we made was more favorable than most foreign firms have been able achieve but less favorable than some Chinese settlements made under corresponding conditions here since Communist take-over. Noteworthy that majority foreign community seemed think our tactics sound although small fringe at one extreme argued we should never have paid a cent or dealt with any Communist representative, while fringe other extreme argued we were too firm, arousing needless antagonism Communist authorities by uncompromising stand we took on basic issue.

5. Although authorities eventually intervened in covert manner giving clear indication they did not wish final showdown this issue, they still have given us no redress, they do not openly admit they intervened, of course have expressed no regrets, have not disavowed action officials who refused intervene and have given us no assurances they would behave any differently if we are subjected to similar indignity in future labor crises.

We have no way making effective representations covering lock-in and threatened violence against several senior officers or prejudice to US Government interests occasioned by complete paralyzation of office for 5 days and tie-up of entire staff, American and alien, for that period. We are delivering strongly worded protest to Aliens Affairs Department shortly. After delivery text will be telegraphed.

6. Incident afforded impressive evidence usefulness Chinese intermediaries belonging non-Communist fellow-travelling minority parties, especially Han Ming of Democratic League and General Chen Ming-shu, KmtRC leader. Consul Chase worked unremittingly on outside to have remedial action taken by officials. His many fine Chinese contacts served our interests well. We are indebted to Han Ming in particular for his strenuous and eventually successful efforts activate authorities. Consul Chase played large role in settlement of affair and is deserving special commendation. His painstaking efforts over long period build up useful Chinese contacts paid off handsomely in this instance as in many others. Account of his efforts over period July 29–August 2 is being rendered separately.⁵¹

7. Looking back it is now plain most dangerous period was afternoon and evening July 30 when mob was in highly inflammable state which could easily have resulted in violence against responsible ConGen officers and sacking of ConGen building and commissary. Serious developments at this time were probably averted by praiseworthy action of Thomas who voluntarily subjected himself to nonstop 25-hours session with workers and by our offer to transmit to Navy Department for workers message which they had drafted. This offer, while later rejected by them when new and more intransigent mob leader took charge, did syphon off some pent-up fury of mob at critical time.

8. Real turning point in incident came on July 31 when I decided authorize Thomas consult on purely advisory basis with GLU re possible solution. Reasoning back of this decision set forth ConGentel 2979, July 31. Injection good offices GLU into picture gave Communists face-saving formula they needed to extricate themselves and bring pressure to bear on workers through organization only semi-official and in theory partly controlled by labor to evacuate building and scale down their demands appreciably.

Throughout affair my objective was, while adhering to essential principle, to show certain pliancy which would convince Communists in absence coercion they could negotiate with us on local issues on basis which might prove mutually satisfactory to some extent. I hoped thus establish precedent which might be useful for future. I believe this objective was in some measure achieved. Communist officials did sit down across table with ConGen representatives and went through process of reasonable give and take for first time. There is reason to believe this example has not been entirely lost on Communists. Their apparent inclination negotiate such questions as disposal ECA cotton and yarn stocks indicates they may have learned it will be expedient to deal with us on certain issues even though they persist in maintaining fiction we have no consular status. To extent we have achieved this objective, a certain limited amount of good may have come out of this unfortunate affair.

I wish to acknowledge with special gratitude invaluable advice and support I received from Embassy at Nanking. Wise counsel and backing of Ambassador Stuart and Counselors Cabot and Jones fortunately were at my disposition at all times thanks to continued availability of long-distance phone as well as radio communications. Forthright representations Consul General Clubb at Peiping may have had important bearing on change in attitude authorities on August 1 and 2.

It should be borne in mind our emergence virtually unscathed from this crisis does not signify we are exempt from further labor crises. Although this incident seems permanently settled with pay-off of workers and signing of quitclaims by them this week, there are other ominous clouds on labor front and we may have renewed unpleasantness with Chinese and Sikhs who have been and will be discharged by other US Government agencies here. While new labor laws may modify their stand, authorities thus far appear still assert in principle right of employees or ex-employees occupy premises of employer during labor dispute and to confine employer under trying conditions until settlement extorted from him.

Sent Department; repeated Nanking 1801.

McConaughy

51. Not printed.